Landscape of history

A relatively short work with only 151 pages of text, this book probably has one of the best ratios of powerful insights to written pages. In describing the craft of how historians map the past, Gaddis could just as well be providing an instruction manual for how analysts should think about their work. In recognizing that, “History is arguably the best method of enlarging experience,” he both articulates the importance of history and points the way to learning efficiently. This book is a remarkable combination of extremely clear thinking, excellent writing, and mind-expanding topics that leaves you smiling every time you open it.

Gaddis gets right to the point in identifying a major problem: “Too many social scientists, in their efforts to specify independent variables, have lost sight of a basic requirement of theory, which is to account for reality.” Many economists (central bankers included), for example, are renown for complex econometric models that are impressive except for their capacity to reflect how the economy will actually perform under certain conditions. The bigger issue is one of perspective. While many social scientists work from a reductitionist perspective by trying to identify independent variables, “Historians have a web-like sense of reality, in that we see everything as connected in some way to everything else.” In other words, Gaddis works from an ecological perspective. More specifically, he focuses on the procedure of "fitting things together.”

This process of "fitting things together” is one that resonates through the book and is incredibly important to gaining a useful perspective on today's markets and economic landscape. Given our increasingly interconnected world and the adaptive behavior of economic participants, it is very hard to argue that there are truly independent variables. Indeed, as Minsky pointed out so clearly in Stabilizing and Unstable Economy, some of the worst policy errors over the last few decades can be attributed to a failure to include important factors such as the global financial system into economic models. While this book certainly helps develop skills useful for investing, it is about much more than that: “If we can widen the range of experience beyond what we as individuals have encountered, if we can draw upon the experiences of others who’ve had to confront comparable situations in the past, the -- although there are no guarantees -- our chances of acting wisely should increase proportionately.”